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Chamber of mines warns over fuel price increase Zambia

CHAMBER of Mines president Emmanuel Mutati says the recent hike in fuel prices will increase the cost of production in the mining sector and make the country more uncompetitive.
And Mutati says the increase in fuel prices will present challenges for mining investors who are likely to review the level of investment, given the increasing costs of doing business in the sector.
The Energy Regulation Board (ERB) a week ago increased the pump prices of fuel by an average of 8.3 per cent after the historic worst performance of the kwacha.
The ERB stated that with the increase, a litre of petrol was now at K10.63 from K9.91 and diesel at K10.01 per litre from the previous K9.20, while kerosene was also raised to K7.48 per litre from K6.83. But Mutati, who is also Mopani Copper Mines (MCM) board chairman, said in an interview that the fuel hike would increase the cost of production, making the country more uncompetitive.
“…All these increases, whether it is in the price of fuel or electricity, have an overall effect of making Zambia more and more uncompetitive for mining because by nature, particularly on the Copperbelt, we have very high-cost mines because of age and use of other old technology so it just adds more to cost,” he said.
Mutati said the increase in the cost of production is estimated to be between US$2 million and US$5 million, depending on the mining firm and scale of operations.
“With the price of fuel going up, in general terms cost of production I think it will increase by probably US$2 million or US$5million, depending on which mine you are at. For electricity, I think it will be double that, we are talking another US$4 million roughly,” he said.
Mutati, however, noted that in spite of the cost of production going up, mining firms would be keen to maintain the same level of production with possible increments to sustain competitiveness in the industry.
“….They should stay the same and, if anything, they (mines) will be making an effort to increase production because with increased production, the unit cost will come down and you become more competitive,” said Mutati. He further observed that the hikes in fuel prices could have the effect of compelling investors to review the level of investment into the sector.
“….Certainly investors will review and assess what is the real cost of production in this part of world; if it is open-pit, they would probably invest, but underground it will be very challenging to make that decision.”

Source – The Post Online